(By Balachander) Cymer Inc. (NASDAQ:CYMI) shares were initiated with a "Hold" rating and price target of $58 by Deutsche Bank analyst Vishal Shah.
"While we believe CYMI shares offer a more defensive way to play the rising capital intensity trend in the semicap sector, recent share price strength suggests some of these positives may already be discounted in the current valuation, which is at a significant premium to semicap peers and ASML," Shah wrote.
San Diego, California-based Cymer is engaged in the development of light sources for the manufacturers of photolithography tools in the semiconductor equipment industry.
Given the relatively high (80 percent - 85 percent) market share in ArF immersion light sources, Shah expects Cymer to benefit from foundry adoption of multiple patterning which is expected to result in 35 percent increase in litho exposure and 10 percent increase in litho layers over the next few nodes.
The analyst said checks indicate that CYMI has a significant lead in EUV development over competitors. Shah expects $110 million revenues from EUV in 2013 and also see $4-$5 earnings power in 2015 assuming 16-36 EUV units get sold in this timeframe.
Despite the above positives, the analyst sees limited potential as we believe meaningful EUV adoption is unlikely prior to the 2016 time-frame.
The stock added 1.13 percent to trade at $61.95 on Friday. Over the past year, shares have been trading between $34.57 and $62.10.